Pavel Durov announced plans for Telegram to go public, despite incoming offers to buy the messenger for $30 bln. What are the general expectations for an IPO? Wouldn't selling be a better option? Is this a good time for an IPO?
Expectations for a potential IPO of Telegram are quite reasonable. On the one hand, this would generate sizable financial resources for the company by attracting public investment. The money will be used for further development of the messenger and the rollout of new functions.
On the other hand, public status and reporting will make Telegram more transparent and accountable to investors, which could limit the freedom of decision-making for founder Pavel Durov.
As regards the direct sale of the company, Durov apparently wants to maintain maximum control over Telegram, which would hardly be possible if it were sold to a strategic investor.
The timing for the IPO looks quite good. Telegram has delivered impressive growth to its audience of 900 mln users. The introduction of monetization through advertising and subscriptions should make the company cash-flow positive within the next year or so. Market conditions are also favorable for technology IPOs.
That said, the current high estimate of $30 bln may well turn out to be overpriced. The determining factor will be Telegram’s financial performance at the time of the IPO. The company will have to improve it as much as possible to meet investors' expectations.
Most likely, Pavel Durov does not consider selling Telegram as the best option for several reasons:
1. He has great ambitions for the development of the messenger and new ideas, the implementation of which requires significant investments. The IPO would raise capital while leaving Durov in control of the company.
2. For a young entrepreneur, Telegram is a brainchild, a source of professional satisfaction and self-realization. Selling TG would deprive him of the opportunity to further develop the project.
3. Durov sees great potential in Telegram and believes in its future growth and capitalization. Therefore, a premature sale could wipe out his share in the success of the project.
4. Work on Telegram has become a large-scale mission to ensure freedom of speech and user privacy in the digital age. Durov is unlikely to want to part with such a momentous challenge.
5. As the founder and leader of the project, Durov values independence in decision making. The IPO would leave him in control of Telegram, as opposed to selling it to a strategic investor.
Thus, for an ambitious technology entrepreneur with a mission and passion for his brainchild, an IPO would be the best way to go in order to raise investment compared to selling the company.